$1b withdrawal triggers more HSF questions

A WEEK before Christmas, more than $1 billion was withdrawn from the Heritage and Stabilisation Fund (HSF). Yet there was nary a peep of explanation from any public official.

In fact, the withdrawal only came to light on June 18 in a quarterly HSF investment report posted on the Ministry of Finance website.

This led TT Coalition of Services Industries president Dianne Joseph to issue a call for greater accountability.

“The HSF is a critical financial buffer for our nation, established to ensure economic stability and savings for future generations,” the TTCSI president observed. “It is imperative the government maintains transparency regarding the use of these funds to uphold public trust and ensure withdrawals align with the objectives of the HSF Act.” We agree.

But there is a contradiction in the legislative framework. According to section 16 of the act, the sovereign wealth fund is a “public account.”

It is subject to oversight by the Auditor General’s Department.

At the same time, section 18 imposes a bar on officials at the HSF from disclosing information on the operation or management of the fund.

The implications of this are far-reaching. It sets a particular tone in HSF affairs, possibly affecting its officials from the top down.

It is an open question whether this stipulation has coloured the way HSF information does or does not come to light.

In any event, is this confidentiality requirement appropriate, given the nature of the fund?

Certain information must clearly be subject to disclosure, as demonstrated by the ministerial publication of quarterly investment updates and annual reports, as well as tabling financial statements in Parliament under the law.

The Santiago Principles of Transparency, to which the HSF is also a signatory, further dictate “clear and publicly-disclosed policies, rules, procedures, or arrangements in relation to the sovereign wealth fund’s general approach to funding, withdrawal, and spending operations.”

Robust compliance with these principles demands a more expansive approach.

The recent withdrawal is the first since September 30, 2021, when $671 million was taken out, the last of a series of pandemic-era drawings that began on March 31, 2020.

In 2022, two deposits, totalling $2.3 billion, were made.

As at the end of 2023, the total net asset value of the HSF was up, notwithstanding the withdrawal, standing at $37.6 billion, $1.8 billion higher than the previous period.

Still, the failure to take a proactive approach to disclosure follows Auditor General Jaiwantie Ramdass’s recent finding that a $1.2 billion deposit was made late, in contravention of the law; years of uncertainty as to how the HSF Act should be interpreted; as well as the controversy that erupted last year after the fund reported a first loss, from which it later recovered.

In relation to the latter, the Government then said it did not rush to tell the public, given that it had been advised to wait it out.

That kind of argument, however, does not hold water in relation to this withdrawal, the foundation of which must be made crystal clear.